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Horse-racing Integrity and Safety Authority: U.S. appeals court rules HISA is unconstitutional

Matt HegartyNov 18, 2022

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A U.S. appeals court has ruled that the Horseracing Integrity and Safety Authority is “facially unconstitutional,” reversing a lower court’s opinion that the authority met constitutional standards of federal oversight.

The ruling by the Fifth Circuit Court of Appeals delivers a critical blow to the authority, a private, non-profit company established by federal legislation passed in 2020, at a time when HISA is preparing to roll out a national medication and anti-doping program, scheduled for Jan. 1. While HISA has faced multiple challenges to its constitutionality in various jurisdictions, the Fifth Circuit decision is the first to rule that the legislation establishing the Federal Trade Commission as its overseer lacked constitutional merit.

“A cardinal constitutional principle is that federal power can be wielded only by the federal government,” the ruling stated. “Private entities may do so only if they are subordinate to any agency. But the authority is not subordinate to the FTC. The reverse is true. The Authority, rather than the FTC, has been give final say over HISA’s programs.”

Charles Scheeler, the chairman of HISA, said in a statement in response to the ruling that HISA “will be seeking further review of this case.”

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“We are focused on continuing our critical work to protect the safety and integrity of Thoroughbred racing,” the statement said.

The Fifth Circuit decision will not go into force until the court issues a so-called mandate of its ruling. That is scheduled to occur on Jan. 10. 

The ruling was decided by a three-judge panel of the court. HISA’s options in pursuing an appeal of the ruling could include a request for the entire Fifth Circuit to rehear the case, a procedure known as an “en banc” hearing. HISA could also ask the U.S. Supreme Court to hear the case. Any appeal would likely be accompanied by a request for a stay of the mandate that will be forthcoming from the Fifth Circuit. 

Because the ruling affects legislation passed by Congress and involves a federal agency, officials of the Justice Department are likely to weigh legal options for an appeal of the ruling as well.  

A separate lawsuit that challenges HISA's constitutionality is currently before the Sixth Circuit Court of Appeals after being dismissed by a district court in Kentucky. The case is scheduled to be heard on Dec. 7, and the outcome of that case could have significant impacts on any appeal of the Fifth Circuit decision.

The specific challenge to HISA’s constitutionality considered by the Fifth Circuit was launched by the National Horsemen’s Benevolent and Protective Association, which filed a lawsuit in Texas Northern District Court in March of 2021, prior to any of HISA’s rules going into force. That court had dismissed the lawsuit, but the National HBPA appealed the dismissal.

“From HISA’s onset, we have thoroughly and fairly examined the HISA corporations impact on our industry and its constitutionality,” said Eric Hamelback, the chief executive of the National HBPA, in a statement released in reaction to the ruling. “We operated in good faith and did our due diligence to appropriately weigh the pros and cons. We have been saying for years this law and defined Authority itself are unconstitutional and we are pleased the court unanimously sided with our position.”

Supporters of HISA had hired several legal experts to analyze the constitutionality of its enabling legislation prior to the bill being introduced, and they had expressed confidence that the bill could survive a constitutional challenge, citing the formation of private regulatory groups such as the Financial Industry Regulatory Authority, or FINRA, a private company that oversees brokerages and exchange markets. 

Several lower courts had initially agreed with that interpretation, but since then, a court in Louisiana ruled that HISA’s jurisdiction should be enjoined in both Louisiana and West Virginia while legal concerns over HISA’s rule-making authority were ironed out. That ruling was later stayed after an appeal by HISA. 

The ruling by the Fifth Circuit cast extensive doubt on the FTC’s ability to oversee the authority. 

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“The FTC concedes it cannot review the Authority’s policy choices,” the judges wrote. “When the public has disagreed with those policies, the FTC has disclaimed any review and instead told the public to ‘engage with the Authority.’ An agency does not have meaningful oversight if it does not write the rules, cannot change them, and cannot second-guess their substance.” 

HISA has submitted multiple batches of rules for FTC review. Its racetrack safety and welfare rules, which went into effect on July 1 of this year, were returned by the FTC to HISA in substantially the same form as they were submitted, with little comment.  

HISA was designed to create a national regulator for horse racing and align the sport’s rules in all U.S. racing jurisdictions. Many state racing commissions have chafed at the authority’s sweeping control, and several states have filed or joined in the lawsuits challenging HISA’s constitutionality.